What’s next for USD/JPY after it briefly dropped below 140.00?
The desk believes that the recent drop in USD/JPY below the 140.00 mark signals a potential shift in market sentiment, particularly ahead of the upcoming Bank of Japan (BoJ) policy meeting. Per the full note from MUFG EMEA, the volatility in USD/JPY reflects broader concerns about U.S. economic resilience and the potential for a policy pivot from the BoJ. With no major economic events on the calendar in the near term, traders are keenly focused on the implications of the BoJ's decisions for the yen's trajectory.
What the desk is arguing
The desk posits that the recent drop in USD/JPY may not signify a prolonged weakening of the dollar against the yen, largely due to the upcoming BoJ meeting, which could dictate market sentiment and influence the trajectory of the pair. Conditions such as BoJ's potential policy action could trigger market adjustments and either reinforce or counter the recent bearish momentum.
Support for this thesis is visible in the commentary from MUFG, which highlights the volatile market conditions and the role that the BoJ's decisions could play in derailing the downward trend in USD/JPY. While some analysts argue that the trend will continue, it's important to consider that monetary policy adjustments can rapidly alter the FX landscape, particularly when markets are keenly focused on any changes from central banks.
Where it sits in our coverage
In our analysis, the consensus target for USD/JPY is 147.5000 by December 2026, with a range that spans from 150.0000 to 157.0000 among various firms. This view is somewhat more conservative relative to MUFG’s projection, which aligns closely with the higher end of our range, targeting 146.0000 for the same period.
Specific firms have notably diverged in their outlooks. For December 2026, we see: - JPMorgan: 164.0000 - Goldman: 148.0000 - MorganStanley: 140.0000.
How other firms see it
The market landscape is mixed, with differing stances among firms about the direction of USD/JPY post-BoJ meeting. Notably, Goldman and ING have both recently revised their targets upward, suggesting a potential short-term resilience in USD/JPY.
Meanwhile, MorganStanley appears more bearish with a target lower than the current consensus. This divergence underscores the uncertainty and mixed sentiment surrounding the upcoming policy announcements and their potential impact on USD/JPY.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01USD/JPY has shown volatility and briefly dipped below the key 140.00 level.
- 02The upcoming BoJ meeting is likely to be a significant factor influencing the currency pair's direction.
- 03Divergence in forecasts by major banks highlights the uncertainty in market sentiment.
Market implications
The mixed outlook on USD/JPY indicates potential trading opportunities around the BoJ meeting. Should the BoJ maintain or shift its current stance, we could see sharp reactions in the currency pair, leading to significant market movements in either direction.
Risks to this view
Key risks include unexpected outcomes from the BoJ meeting that could further amplify volatility in USD/JPY. Additionally, external factors such as U.S. economic data releases and geopolitical developments could also impact currency performance.
USD/JPY — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 159.80 |
ING | Bullish | 152.00 |
Rabobank | Bullish | 145.00 |
Welcome to the MUFG Global Markets FX Week Ahead podcast with Leigh Hardman, Senior Currency Analyst at MUFG. It's Friday the 25th of April, 2025, and joining Leigh to post some questions on the financial market themes for the week ahead is Michael Owen, Head of Global Client Desk EMEA. The following podcast is intended for professional investors and eligible counterparties only.
And not for retail clients. Any content should not be regarded as an offer to conduct investment business or an investment recommendation, but for information purposes only. Good afternoon Leigh.
Hi Michael. So it's been another eventful week for the dollar and we hit another year to date low before a rebound. What have been the main drivers of dollar performance this week?
Yeah, certainly at the start of this week we saw another heavy sell off for the dollar and that was on the back of the building kind of fears that President Trump could take action to undermine the independence of the Fed when setting monetary policy. There was certainly building kind of speculation that he could take action to try and fire Fed Chair Powell before his term comes to an end next year. Obviously, if that was to materialize, that would be a significant kind of negative shock to confidence in U.S. policymaking.
It could have led to certainly a more adverse outcome for the U.S. economy, increasing the risk of a more stagflationary outcome as inflation expectations could have become more unanchored if Powell was to be sacked. Fortunately, Trump did come out quickly to kind of deny that speculation and say that he has no plans to fire Chair Powell. So certainly that has provided some relief for the dollar and U.S. assets.
And that's certainly one reason why we have seen the dollar start to rebound as this week has progressed. The second reason is that there's also more optimism that we could see further kind of reversal or kind of watering down of some of Trump's kind of worst tariffs that he's put in place. There's certainly been a number of comments from Trump administration officials and reports in the media suggesting that Trump could take action to reduce some of the tariffs that have been put in place on China.
Certainly, we'd agree with the comments from U.S. Treasury Secretary Scott Bevin, who described the current tariff rates on China as unsustainable. Obviously, at these kind of levels at around 145 percent, it's pretty much a kind of de facto trade embargo.
It brings kind of trade between China and the U.S. to a dead end, really, at this point in time. So clearly that can't be sustained, that the two kind of major economies in the world not trading with each other. That would have obviously significant negative implications for global growth.
Sources & References
How we cover this story
Cross-firm research
USD/JPY Consensus Check: Spot at 159.20, Target 156.0 — Week of August 25, 2026
USD/JPY trades 2.05% above the 23-firm Dec-26 median of 156.0, with a 25.5-point dispersion that reflects deep disagreement on the BoJ rate path.